Next Things First


The Big Push for Healthcare IT … Economic + Political Perspectives (From Howard Luks) by charlottegee
December 15, 2008, 10:57 am
Filed under: economy, health it, health policy | Tags: , ,

During a speech last week in DC in front of the Department of Health and Human Services Health Policy Forum (with nearly 50 of America’s thought leaders on disruptive healthcare), Ben Sasser, the Assistant Secretary of Health, commented that the projections for Medicare Part A funding were wrong. The Department figured out last week that Part A funding will be bankrupt prior to the end of Obama’s second term!! And solvency of Medicare will not be the only healthcare (HC) issue this administration will need to tackle.

President-elect Obama, Senator Baucus and others are crafting numerous initiatives they plan to bring forward early during the new administration’s first term. Most of these initiatives are geared toward *reforming* the healthcare system. There are innumerable issues that need to be addressed under the auspices of HC reform. Access, quality, efficiency, diminishing medical errors, minimizing duplication, waste and affordability are *simply* a few of the issues the administration will need to contend with.

It appears the incoming Obama HC team believes, right or wrong, that a big push into HC IT infrastructure will pose as the spark toward adoption of more widespread reform. There are both economic and political reasons why it makes sense to tack the IT spend onto the current stimulus package under consideration.

From an economic perspective, a big push into HC IT will result in jobs being added to the only sector of the economy that has demonstrated job growth over the last two quarters. Heading into 2009, job growth is going to slow in the HC sector as federal and state Medicaid funding is severely cut during the next round of budget cuts. (Consider: In New York State, Governor Patterson’s staff already has informed hospitals to plan for their worst nightmare.)

Combined with the tightening of the credits markets, hospitals are going to be hard pressed to offer services to the poor, uninsured and under-insured. “No margin, no service” will become the rule of the hospital landscape in 2009. Both the credit markets and financial issues will most certainly impact the ability of hospitals to pursue large capital intensive IT initiatives.

The AMA news recently reported that “Despite changes to federal rules that allow hospitals to donate health IT to physicians, studies show neither hospitals nor physicians are jumping at the opportunity.” No doubt, the cuts in state funding, the increase in the uninsured, and thus the increased financial stress on hospitals that offer services to the uninsured, will make it impossible for hospitals to spend money on IT without government assistance.

Therefore, *if* the incoming administration *believes* that a HC IT initiative is necessary as a stimulus for job creation and broader HC reform, the timing for tacking on a HC IT initiative as part of the current stimulus package is perfect.

From a political perspective, tacking on a HC IT spend to the current economic stimulus package will virtually assure its passage. The Democrats are working very hard to get a *comprehensive* stimulus package ready for President-elect Obama’s signature within a few weeks of entering office. All indications point to the fact that the monetary figure will be enormous — but many economists believe that deficit (Depressionary) spending and contemporary New Deal programs are *necessary* if we are to avoid a significant deepening of the current recession. That theory will give proponents of a HC IT initiative the ammunition necessary to obtain the necessary support for a 5-year, $50-billion IT package.

Perhaps most important: After the passage of an enormous stimulus package, it will be difficult for the new administration to obtain support of an exceptionally expensive comprehensive healthcare reform package — strictly based upon the cost of such an effort. By taking the $50 billion IT spend (and SCHIP spending) out of the HC Reform package, the overall cost of healthcare reform will *appear* lower … and perhaps more palatable to fiscally conservative members of Congress.

Bottom line? Healthcare IT is estimated to be at least a $50 billion industry in the United States. Anybody who chooses not to participate could be giving up a potentially large amount of revenue.

Submitted by Howard J Luks, MD

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